Building Financial Security, Together THE AMERICAN COUNCIL OF LIFE INSURERS | 2019 ANNUAL REVIEW ACLI.COM We serve 90 million American families, helping them build a financial safety net that protects them through all stages of life. Helping people take care of the things that matter most is our most critical mission. We’re Building Security, Together. The things that matter most. Those five words capture what American families think about at their most human level. It captures what our industry protects at our most foundational level. And it captures what policymakers are ultimately trying to solve as a matter of representational responsibility. It’s where our industry solutions connect with societal concerns and consumer needs. Advocacy powerhouse Over the past year, we’ve hit the ground running building an integrated, powerful advocacy strategy centered on that sweet spot. We established a leadership platform. We endorsed bold new retirement security solutions, like House Ways and Means Committee Chairman Richard Neal’s auto-401(k) proposal, and created momentum and together drove final passage by Congress of the SECURE Act to increase access to retirement savings plans. We became a leader on big societal issues like paid family leave and Dan Houston privacy. We are growing our influence with Team USA and the NAIC on international capital standards and Chairman President & CEO the group capital calculation. We worked hard with state regulators to strike the right balance between Principal Financial Group affordability of products and the safety of companies. We kept a fiduciary approach to consumer protection at bay, while raising our best interest approach with the SEC and NAIC. We developed a strategy to show how tax treatment affects our ability to provide affordable products to 90 million American families. We raised our game in our advocacy infrastructure, launching IMPACT, an ACLI news site with views on our industry’s work. We’re building a strong grassroots advocacy network. We partnered with new communities, like Junior Achievement, our military and veterans community, Latino community, firefighters, and others to raise the conversation on issues of financial security for all Americans. In so many ways, 2019 was an exceptional year as we furthered our industry’s mission. For all of our forward movement, we still have more to do. A changing world Susan Neely Our society continues to confront big, generational challenges, like increasing lifespans and technology President & CEO American Council of and workforce changes. Political headwinds are shifting every day. Life Insurers At a moment when nothing stays the same, people crave a sense of protection. And do you know what? No other industry is there for people through every stage of life like the life insurance industry is there. As we always have been. Guaranteed. All of the work this industry does builds a critical foundation for American families in a time of uncertainty. A reminder of why we are here We hope the accomplishments and initiatives in this review remind you of why we are here. We are for all Americans. Now and in the years ahead, we will continue to work with families and individuals, policymakers, change agents, and our members to build security for American families, together. Dan Houston, Chairman, President & CEO Susan Neely, President & CEO Principal Financial Group American Council of Life Insurers ACLI 2019 ANNUAL REVIEW 1 About Our Industry We’re leading on issues that have a profound impact on American families such as financial and retirement security, life insurance protection, long-term care insurance, and access to paid family and medical leave. Protect Generate Invest 90 2.7 $6.3 million million trillion families jobs in the U.S. economy 2 ACLI 2019 ANNUAL REVIEW Pay out $2.1 billion every day to American families and businesses including $32.6 million every day in long-term care claims ($11.9 billion annually) $358.6 million every day in life insurance payments ($130.9 billion annually) $1.1 billion every day in annuity payments ($406 billion annually) $52.9 million every day in disability income claims ($19.3 billion annually) ACLI 2019 ANNUAL REVIEW 3 Working in America’s Best Interest Our industry’s mission is to help more Americans achieve financial stability, retirement security and peace of mind—a responsibility that requires fidelity to the highest standards of conduct and safeguards the ability of middle-class Americans to access retirement savings tools. Achieving a Harmonized National Standard of Care for Consumers Consumers rely on sound recommendations from financial professionals as they prepare for and enter retirement. Our industry supports consistent and clear protections for savers and retirees. We worked closely with the National Association of Insurance Commissioners (NAIC) and the Securities and Exchange Commission (SEC) on a harmonized best interest standard of care. With our significant input, in 2019 the SEC adopted “Regulation Best Interest” and Form CRS. The new standards add significant consumer protections, increase transparency around client/customer relationships, and preserve consumer access to valuable services. A best interest approach means consumers in the market for certain annuities and other financial products will receive better information, in plain English, to help them make informed decisions. Financial professionals will have to act with care, skill, and diligence while mitigating or eliminating potential conflicts of interest that might influence recommendations. With the SEC work complete and the NAIC initiative close behind, we continue to engage with the Department of Labor presenting our industry’s high standards and principles for consumers. 4 ACLI 2019 ANNUAL REVIEW Successful Collaboration With a nationwide standard, Best Interest at the State Level consumers across states will enjoy strong, harmonized protections. We worked closely with the NAIC to incorporate a Best Interest standard into the That goal requires a coordinated association’s Suitability in Annuity Transaction Model Regulation—supporting an effort involving all of our member approach that is similar to the SEC’s. companies and key allies, including Our industry opposes efforts to implement a fiduciary-only approach that denies the National Association of Insurance people access to financial products they need. To date, ACLI has successfully and Financial Advisors (NAIFA) and opposed such efforts inMaryland and is actively engaged against initiatives in The Association of Advanced Life New Jersey, Nevada, and Massachusetts, demonstrating our commitment to Underwriting (AALU). consumer choice through a Best Interest standard. A Priority: Privacy and Cybersecurity For generations, our industry has respected and maintained the privacy and security of personal information. Our record of responsible stewardship can serve as a model as policymakers seek to protect consumers in other areas. Our industry has an enduring commitment to safeguarding consumer information— and fastidiously supports and abides by laws protecting the disclosure of personal information. Given the sensitive nature of health and financial information, customers are informed when information is collected about them for underwriting, or if the security of their personal information is breached. As technology advances and new issues around privacy emerge, we will continue Our Commitment to to advocate for unified, thoughtful approaches to new privacy and security laws that ensure we can maintain transparent, effective relationships with consumers. Safeguarding Information • Developed and adopted a new privacy policy regarding federal pre-emption Task Force on Big Data • Implemented principles that will Like companies across many industries, our members help guide us as we work with are embracing the power of big data. Big data helps all levels of government accelerate the underwriting process—providing INNOVATION • Worked with federal and state qualified consumers with financial protection faster regulators to see that any new than ever before. That can provide a better experience FOR FINANCIAL data privacy regulations reflect for consumers by allowing them to skip elements of the our strong record and are underwriting process, and to receive coverage quickly PROTECTION uniform across jurisdictions. and noninvasively. It also helps our companies work more efficiently and effectively. Our newly formed Big Data Task Force helps bring ideas to the table. ACLI 2019 ANNUAL REVIEW 5 Retirement Security: Finding Solutions As Americans live longer, sustaining financial security through retirement has become a major challenge. Today, a typical 65-year old can expect to spend 20, 30, or more years in retirement. That, coupled with a decline in employer pension plans, a growing gig economy and, for many, insufficient savings, has led to a retirement security gap. Our member companies are leading providers of retirement solutions including annuities, the only financial product guaranteeing lifetime income for Americans. We’re raising our game to drive policy solutions to help more individuals plan for long and happy retirements. 6 ACLI 2019 ANNUAL REVIEW Big Problems Require Big Solutions Life insurers manage In 2019, our industry announced a bold shift. We endorsed a proposal by House Ways and Means Chairman Richard Neal (D-MA) that would require employers to offer workplace retirement plans and encourage employees to save through % auto-enrollment at work. 13